Foreign Investment in Real Property Tax Act (FIRPTA) income tax withholding

Under the FIRPTA, a foreign person who disposes of a U.S. real property interest is subject to the income tax withholding on the transaction.

FIRPTA gives the United States the authority to tax foreign persons on the disposition of U.S. real property interests. For FIRPTA purposes, a disposition means a “disposition” for any purpose of the Internal Revenue Code (IRC). Therefore, dispositions include but are not limited to sales or exchanges, liquidations, redemptions, gifts, transfers, etc.

FIRPTA rules can get complex pretty quicky and, generally speaking, there is no good way to go around FIRPTA regime, if it applies to you and there is no exemption available. Consider planning ahead to avoid penalties.

OUR SERVICES AND HOW WE CAN HELP

Consulting on withholding tax strategy & documentation: We can advise parties on withholding obligations under FIRPTA to ensure compliance with proper amounts. We can assist with analysis whether FIRPTA applies and whether any exceptions may apply.
Withholding Certificate Application: We can assist with filing form 8288-B Request a Reduced Withholding Certificate, where appropriate. Consider starting this process 90 days prior to projected closing and do not underestimate the importance of filling it out correctly.
W-7/1040NR/Gain calculation for foreign sellers: We can assist foreign sellers with application for U.S. TIN and U.S. compliance. We can also assist sellers with calculating gain on sale. It does get more complicated when property let's say was rented out before subject to depreciation recapture rules.
Tax Planning: We can assist with crucial tips and planning suggestions before the transaction takes place to avoid delay, etc.

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Foreign Investment in Real Property Tax Act (FIRPTA) income tax withholding

OUR SERVICES AND HOW WE CAN HELP

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